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Decentralisation, Centralisation and Devolution in publicly funded health services: decentralisation as an organisational model for health care in England

Report for the National Co-ordinating Centre for NHS Service Delivery and Organisation R & D (NCCSDO)

July 2005

prepared by

Stephen Peckham*

Mark Exworthy

Martin Powell

Ian Greener

*Department of Sociology and Social Policy, Oxford Brookes University

School of Management, Royal Holloway, University of London

Department of Applied Social Studies, University of Bath

Department of Management, University of York

Address for correspondence

Stephen Peckham, London School of Hygiene and Tropical Medicine,

London

Tel: 020 7927 2023; e-mail: [email protected]

Decentralisation in publicly funded health services

NCCSDO 2006 2

Contents

Executive Summary

Background 6 Aims of the study 6 Methods 6 Findings 7 Key messages for policy and practice 9 Areas for further research 10

The Report

Section 1 Background to the study 11 1.1 Context to the study and to decentralization 11 1.2 Aims and objectives 15 1.3 The literature review 16 1.4 Review methods 17

1.4.1 Search strategy 17 1.4.2 Data search 18 1.4.3 Data categorization and appraisal 18

1.5 Analysis 19 1.6 Involvement of experts 19 1.7 Structure of the report 20

Section 2 Understanding decentralisation 22 2.1 Introduction 22 2.2 Overview of academic disciplinary approaches to decentralisation

22 2.3 What is the purpose of decentralisation? 25 2.4 What is decentralisation? 30 2.5 Frameworks of decentralisation 31 2.6 Measurement issues 37 2.7 Summary of the shortcomings of frameworks and development of the

Arrows Framework 40 2.8 Conclusion 42

Section 3 A history of decentralisation policies in the NHS 44

3.1 Introduction 44 3.2 The classic NHS (194879) 45 3.3 The Conservative Government (197997) 47 3.4 The Arrows Framework 56 3.5 Conclusion 59

Section 4 Decentralisation under New Labour: policy since 1997 60

4.1 Introduction 60 4.2 Labour and the NHS 60 4.3 Considering New Labour policy thematically 62 4.4 Conclusion 73


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Section 5 Analysis of the evidence 74 5.1 Introduction 74 5.2 A review of the extant evidence 74

5.2.1 Assumptions about decentralisation 76 5.2.2 Theoretical propositions 76 5.2.3 Availability of evidence 77 5.2.4 Quality and relevance of the evidence 77

5.3 Outcomes 79 5.3.1 Introduction 79 5.3.2 Assumptions 80 5.3.3 Caveats 81 5.3.4 Evidence that decentralisation improves outcomes 82 5.3.5 Evidence that decentralisation worsens outcomes 82 5.3.6 The balance of evidence 82

5.4 Process 83 5.4.1 Introduction 83 5.4.2 Assumptions 83 5.4.3 Caveats 84 5.4.4 Evidence in favour 85 5.4.5 Evidence against 85 5.4.6 Balance of evidence 86

5.5 Humanity 86 5.5.1 Introduction 86 5.5.2 Assumptions 87 5.5.3 Caveats 88 5.5.4 Evidence that decentralisation promotes humanity 88 5.5.5 Evidence that decentralisation is detrimental to humanity

88 5.5.6 Conclusion: the balance of evidence 89

5.6 Equity 89 5.6.1 Introduction 89 5.6.2 Assumptions 89 5.6.3 Caveats 90 5.6.4 Evidence that decentralisation promotes equity/reduces

inequality 91 5.6.5 Evidence that decentralisation hampers equity/widens inequality

92 5.6.6 The balance of evidence 93

5.7 Staff morale/satisfaction 95 5.7.1 Introduction 95 5.7.2 Assumptions 95 5.7.3 Caveats 96 5.7.4 Evidence that decentralisation promotes staff morale and

satisfaction 96 5.7.5 Evidence that decentralisation decreases staff morale and

satisfaction 97 5.7.6 Conclusion: the balance of evidence 98

5.8 Responsiveness and allocative efficiency 99 5.8.1 Introduction 99 5.8.2 Assumptions 99 5.8.3 Caveats 100 5.8.4 Evidence that decentralisation promotes responsiveness

101 5.8.5 Evidence that decentralisation decreases responsiveness

101


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5.8.6 Conclusion: the balance of evidence 101 5.9 Adherence 102

5.9.1 Introduction 102 5.9.2 Assumptions 103 5.9.3 Caveats 103 5.9.4 Evidence that decentralisation improves adherence 104 5.9.5 Evidence that decentralisation reduces adherence 105 5.9.6 Balance of evidence 106

5.10 Technical efficiency 107 5.10.1 Introduction 107 5.10.2 Assumptions 107 5.10.3 Caveats 108 5.10.4 Evidence that decentralisation improves technical efficiency

109 5.10.5 Evidence that decentralisation hampers technical efficiency


5.11 Accountability 114 5.11.1 Introduction 114 5.11.2 Assumptions 115 5.11.3 Caveats 115 5.11.4 Evidence that decentralisation promotes accountability

116 5.11.5 Evidence that decentralisation decreases accountability


5.12 Conclusion 117

Section 6 Understanding and interpreting the evidence 118

6.1 Relevance of the evidence to English health care organisations 118

6.2 Outcomes (for patients/health outcomes) 119 6.3 Process measures 119 6.4 Humanity 119 6.5 Responsiveness (including allocative efficiency) 120 6.6 Staff morale/satisfaction 121 6.7 Equity 121 6.8 Efficiency (technical/productive) 122 6.9 Adherence 122 6.10 Accountability 123 6.11 Conclusion 123

Section 7 Conclusions: outstanding research questions and further work 126

7.1 Introduction 126 7.2 Summary of the main findings 126 7.3 Implications for the development of health care organisations in

England 127 7.4 Recommendations for policy 129 7.5 Recommendations for practice 129 7.6 R&D questions and further work 130

7.6.1 Conceptual framework 130 7.6.2 Measuring decentralisation 131 7.6.3 Links to organisational performance 131


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7.6.4 Decentralisation and function 131 7.6.5 Decentralisation and decision space: relationship between

decentralisation and local health economies 132 7.6.6 Decentralisation and participation 132 7.6.7 Decentralisation and human resources management 133 7.6.8 The impact of decentralisation on the centre 133 7.6.9 Longitudinal studies of decentralisation 133

7.7 Conclusion 134

References 136

Appendices

Appendix 1 Summary of evidence 161

Appendix 2 Database search results 212


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Executive Summary

Background

Current National Health Service (NHS) policy sets out a number of broad

themes that include organisational freedom from central control, patient

empowerment and clinical empowerment. These reflect many of the

assumptions made in the literature about the benefits of decentralisation. In

other sectors, as in the NHS, decentralisation is usually seen as a good thing

because it:

frees managers to manage

enables more responsive public services, attuned to local needs

contributes to economy by enabling organisations to shed unnecessary

middle managers

promotes efficiency by shortening previously long bureaucratic

hierarchies

produces contented and stimulated staff, with increased sense of room

for manoeuvre

makes politicians more responsive and accountable to the people.

Aims of the study

This review examines the nature and application of decentralisation as an

organisational model for health care in England. The study reviews the

relevant theoretical literature from a range of disciplines relating to different

public- and private-sector contexts of decentralisation and centralisation. It

examines empirical evidence about decentralisation and centralisation in

public and private organisations and explores the relationship between

decentralisation and different incentive structures, which, in turn affect

organisational performance.

Methods

The review encompassed two main activities. The first was an analysis of the

conceptual literature on decentralisation to clarify parameters that could be

measured. Second we undertook a review of the extant literature:

to map the available literature

to provide a critical overview of existing work in relation to appropriate

themes

to identify areas where more research may be of use

to consult with users to complement and enhance overall findings.


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Findings

It is clear that decentralisation in health policy is a problematic concept. First,

there are significant problems of definition. The term decentralisation has

been used in a number of disciplines, such as management, political science,

development studies, geography and social policy, and appears in a number

of conceptual literatures such as public choice theory, principal/agency

theory, fiscal federalism and centrallocal relations. It has links with many

cognate terms such as autonomy and localism, which themselves are

problematic. Other commentators tend to use different terms, such as agency

centrallocal relations, and national versus local. Whereas decentralisation

and devolution tend to be the dominant terms, they are rarely defined or

measured, or linked to the conceptual literature. Second, much of the

literature refers to elected local government with revenue-raising powers or is

related to changes in so-called developing or lower-income countries.

Application to the English NHS, which is appointed and receives its revenue

from central grants, is therefore problematic.

The discussion in this report identifies three main problems associated with

the analysis of decentralisation. These are as follows.

There is a lack of clarity regarding the concepts, definitions and measures

of decentralisation.

The debate about decentralisation, and subsequent analyses of

decentralisation, lack any maturity and sophistication.

Assumptions about the effects of decentralisation on a range of issues,

including organisational performance, are incorporated into policy without

reference to whether evidence or theory supports such an approach.

Clarity of the concept

Previous studies have tended to treat decentralisation as a uni-dimensional

concept defined by concepts that lacked conceptual clarity, such as power and

autonomy. Little attention was paid in the literature to adequately defining

and measuring the where and what of decentralisation. In addition, analyses

of decentralisation pay little attention to clearly defining what is being

decentralised and our new Arrows Framework (see overleaf) provides a useful

way of conceptualising this aspect of the process.


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The Arrows Framework

Tier

Activity

Global Europe UK England/Scotland/Wales/ Northern Ireland

Region, e.g. SHA

Organisation, e.g. PCT

Subunit, e.g. locality/practice

Individual

Inputs

Process

Outcomes

Arrows indicate the direction of movement.

PCT, primary care trust; SHA, strategic health authority.


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Evidence on decentralisation and organisational performance

Decentralisation is not a completely discrete area of research and more

attention needs to be paid to how it is utilised as a concept in future practice,

policy and research. The brief for this review identified two areas for analysis

relating to relationships between organisations. In addition, the changing

nature of the dynamics between parts of a system over time, resulting from

the combination of multiple centres of direction and regulation (including

financial, political and technical) and multiple strategies emerging among the

regulated organisations (including collaboration, compliance and competition),

was also identified as an area for investigation. There was little evidence in

our review to be able to comment on these areas and further substantive

reviews may be required.

The key message from this review is that decentralisation is not a sufficiently

strong individual factor to influence organisational performance as compared

to other factors such as organisational culture, external environment,

performance monitoring process, etc. Neither is there an optimal size/level

that provides maximum organisational performance. Different functions and

the achievement of different outcomes are related to different organisational

sizes and levels. There are, therefore, trade-offs or compromises between

different activities and outcomes; for example, different approaches to equity,

responsiveness versus economies of scale and so forth.

Key messages for policy and practice

It is important that in making decisions policy-makers and managers

recognise inter-relationships between inputs, processes and outcomes and

levels in the sense that any organisation (or individual) can gain and lose.

They also need to be aware that the evidence base for the impact of

decentralisation on organisational performance is poor and that there is little

substantive evidence to support the key assumptions made about

decentralisation.

It is also essential that decentralisation is seen as a process one of a

number of factors that can be employed for achieving particular goals rather

than as an end in its own right. This review has demonstrated that much

discussion of decentralisation is based on assumptions that are not

substantiated by theory or evidence. A key problem is that benefits in one

context are incorporated into general assumptions and are often transferred

to other contexts, despite the problems associated with doing this. Local and

national health care organisations need to develop a more sophisticated

understanding of decentralisation processes and learn that simple

assumptions about the benefits, or otherwise, should be avoided. Health care

managers and practitioners should therefore give more explicit recognition to

the compromises/trade-offs between performance criteria (e.g. equity versus

efficiency versus responsiveness, etc.) when developing strategies. Policy-

makers and managers also need to understand that decentralisation is not a


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panacea it is a process which among other factors can have an impact on

organisational performance but which should not be seen as an end in itself.

Areas for further research

We were asked to specifically examine gaps in the current literature and

knowledge base. In general we recommend that consideration is given to

research that addresses the issue of context with the use of good-quality case

studies and also to research that takes a longer time span than the normal

3-year period, in order to capture change over a more realistic period. In

addition, we believe that there is a need for research that examines

specifically the relationships between and within levels by adopting studies

that focus on health care economies rather than simply organisations. We

suggest that in addition to these general comments future research is focused

in two broad areas.

Decentralisation as a concept

Further research is needed on the development of conceptual models (and

especially the Arrows Framework) for health services decentralisation and the

way it is measured. The only dimension that is measured (albeit poorly) is

fiscal decentralisation and further research is required to identify the key

indicators for measuring decentralisation.

Decentralisation and performance

A relationship between decentralisation and organisational performance exists

but it is often contextually specific or equivocal. Future research in this area

should therefore incorporate decentralisation but should also address the

different contexts of decentralisation. In particular, what function works best

at what level and is there a specific receptive context for particular functions?

In addition, research on decentralisation needs to move beyond a focus on

single organisations to explore the extent to which local health economies or

communities have autonomy. Particular areas of organisational performance

might include exploring the relationships between decentralisation and

accountability, human resources management and professional autonomy.


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The Report

Section 1 Background to the study

1.1 Context to the study and to decentralisation

The issue of a national, centralised versus a local, decentralised service was

one of the major debates in the formation of the National Health Service

(NHS) between the then Minister of Health, Aneurin Bevan, and the Deputy

Prime Minister, Herbert Morrison, in the 1940s. Throughout the history of the

NHS there has been a trend of thought advocating democratising and/or

decentralising the NHS (e.g. Powell, 1997; Hudson, 1999). There has been

some reassessment of the Bevan orthodoxy (Szreter, 2002; White, 2004).

Blunkett and Jackson (1987) termed nationalisation Labours great mistake

and ministers such as John Reid, Alan Milburn and David Blunkett have

advocated different shades of new localism. Campbell (1987) writes that:

all the fundamental criticisms of the NHS can be traced back to the decision not

to base services on local authorities. The various medical services were

fragmented instead of unified; the gulf between the GPs and the hospitals

widened instead of closed; there was no provision for preventive medicine;

there was inadequate financial discipline and no democratic control at local

level. In retrospect the case for the local authorities can be made to look

formidable, the decision to dispossess them a fateful mistake by a Minister

ideologically disposed to centralisation and seduced by the claims of

professional expertise.

Campbell (1987: 177)

Without doubt the NHS embodies diversity and uniformity. Within a national

health service that is (notionally) committed to equity, the pressures for

uniformity appear strong. The national (UK) character of the health service,

financed from general taxation, provides reasonably equitable access to

hospital-based and primary care services. However, a series of local health

services, rather than a single national one, is evident (Mohan, 1995;

Exworthy, 1998; Powell, 1998); this diversity might provide locally contingent

services and local horizontal integration (Exworthy and Peckham, 1998) but it

may also represent inequality and fragmentation (Peckham and Exworthy,

2003). Butler (1992: 125) summarises the dichotomy: is the NHS a national

service which is locally managed or a series of local services operating within

national guidelines? Hunter and Wistow (1987) cite some other reasons for

assuming uniformity across the UK:

historical commitments and limited increments in financial growth

(limiting major change)

pressure-group activity from professional bodies (e.g. the British Medical

Association and trade unions)

UK-wide agreements such as pay, terms and conditions


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the relative lack of policy-making resources in the territorial offices

(compared with London).

However, there are countervailing pressures encouraging diversity, including

the forces for political devolution, territorial cultures and traditions, the way in

different types of policy are implemented, the territorial regimes of

governance and the restructuring of the state in the light of broader

pressures. Therefore, many variations within UK health policy might relate as

much to political and administrative factors as to health or health care factors.

In a recent Kings Fund discussion paper (Kings Fund, 2002) two key

problems were identified with the NHS: over politicisation and over

centralisation. To address these, three strategies were suggested, involving

(a) greater distance between the Government and the NHS, (b) separate

providers from central control and (c) greater devolution from the centre.

Central to these proposals are the concepts of decentralisation and

devolution. Decentralisation is a complex concept that is utilised in a wide

range of disciplinary contexts including political science, geography,

management studies and organisational theory (Smith, 1985; Burns et al.,

1994; Exworthy, 1994; Pollitt et al., 1998). Whereas essentially the literature

identifies two basic typologies relating to geography (spatial dimension) and

level (organisational dimension), decentralisation remains a contested

concept. Within the UK decentralisation has a long history embodied in

debates between Bevan and Morrison about political and organisational

decentralisation of the NHS in the 1940s (Nissel, 1980; Baggott, 2004).

Current debates about the role of the centre, patient choice, primary care

trusts (PCTs), practice-based commissioning and the creation of foundation

trusts and new governance arrangements provide the context for the present

wave of decentralisation in the NHS. Government proposals set out in the new

NHS Five Year Plan emphasise shifting power from the centre, described by

the Prime Minister as finding the balance between individual choice and

central control. In his speech to the NHS Confederation in June following

John Reids launch of the new NHS Five Year Plan Sir Nigel Crisp, Chief

Executive of the NHS, described the NHS as decentralizing, to move away

from Bevans adage that the sound of a bedpan dropped in a distant hospital

should reverberate through Whitehall. In future, NHS organisations would be

asked to set local targets according to five principles: identified gaps in

services, the needs of the local population, an equity audit paying

particular attention to the needs of black people and those from ethnic

minorities, evidence-based interventions and, where possible, shared targets

with other NHS bodies and local authorities. Instead of 80% of initiatives

being dictated nationally, with 20% set locally, 80% of the NHS's priorities

would be determined locally. But Crisp warned, The journey will not be a

straight line. There will be times when the centre seems to be too interfering

and too controlling, and other times when everything will seem too

decentralised, with accusations not just of postcode prescribing, but of

postcode healthcare.

Government policy is also committed to allowing patients a greater say in

their own health care, for example by choosing or sharing in the decision


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about where they should be treated, what kind of treatment to have or who

should carry it out, decentralizing decisions further than simply to local NHS

organizations and professionals. Not only is it seen as right that patients

should have such involvement, but that such a policy has beneficial

consequences, for instance making patients feel more satisfied because they

get services which suit their needs better, or improving the general quality of

health services because of competition between providers, or enhancing

equity by giving more choice to those who have been disadvantaged in the

past. The model endorsed by the later Labour government, based around

individual patient choice, is perhaps the clearest attempt yet at market

consumerism (Greener, 2004). This model was outlined in The NHS Plan and

in the policy documents Extending Patient Choice and Delivering the NHS Plan

(Department of Health, 2000, 2001a, 2001b, 2002). Later came Building on

the Best: choice, responsiveness and equity in the NHS and the establishment

of the Commission for Patient and Public Involvement in Health (Department

of Health, 2003). Government policy in these directions has also been

supported by professional and consumer groups, supporting greater choice for

consumers, though acknowledging that there are limits to, and adverse

consequences of, choice (National Consumer Council, 2004).

Current NHS policy sets out a number of broad themes that include

organisational freedom from central control, patient empowerment and clinical

empowerment, reflecting many of the assumptions made in the literature

about the benefits of decentralisation. In policy usage as evidenced by

recent use in the NHS decentralisation is seen as a good thing because it:

frees managers to manage

enables more responsive public services, attuned to local needs

contributes to economy by enabling organisations to shed unnecessary

middle managers

promotes efficiency by shortening previously long bureaucratic

hierarchies

produces contented and stimulated staff, with increased sense of room

for manoeuvre

makes politicians more responsive and accountable to the people.

The important link here is that decentralisation is seen as having the potential

to improve organisational performance through localisation and organisational

change, usually conceptualised as smaller independent organisations rather

than simply as subunits of larger bureaucracies (e.g. PCTs rather than local

offices of the NHS). Current government policy in relation to the NHS also

promotes decentralisation as a way of releasing local health services from the

constraint of central direction and thus underpins the drive towards

improvements in health care (Department of Health, 2000, 2004; Kings Fund,

2002). It is argued that decentralisation with devolved power creates

autonomy to act and manage. This is clearly a key element of current policy

rhetoric with regard to PCTs and foundation hospitals for example.

Presumably the goal of decentralisation in health care systems is to increase

performance and/or improve health outcomes and an analysis of


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decentralisation must, therefore, relate to examining what is being

decentralised and for what purpose.

Thus it is essential to identify the theoretical underpinning of the concept of

decentralisation before exploring its application in policy and practice. This

review identifies, therefore, a number of key theoretical positions such as

public choice theory, democracy and organisational theory and key concepts

and measures relating to decentralisation to develop a typology of approaches

to decentralisation drawing on existing empirical studies identified in the

review. A secondary approach will be to identify frameworks for defining

decentralisation/centralisation. In particular, implementation theory discusses

the need to balance professional and organisational discretion (suggesting a

devolved and decentralised organisational structure) and the need for central

policy control to achieve policy delivery the concept of professional

discretion being particularly relevant in relation to delivery of health care

services (Harrison and Pollitt, 1994; Hill, 1997). Capturing this individual

context of health care delivery as well the shift towards patient autonomy are

key issues that are addressed in the conceptual discussion of decentralisation

found in this report. In relation to exploring the effectiveness of decentralist

approaches we examine concepts of contingency, local responsiveness and

the tensions between local responsiveness, innovation and opportunity

(decentralist tendencies) as compared with central performance monitoring

and control (centralist tendencies; Burns, 2000). In addition, the continued

fragmentation of health services in England raises issues of vertical

decentralisation and devolution between local agencies (such as PCTs, care

trusts and NHS hospital and specialist trusts) and nationally (such as the

Department of Health, Modernisation Agency and regulatory organisations

such as the Commission for Health Care Audit and Inspection (CHAI),

professional bodies, etc.). Thus for the NHS in England, the concept of

decentralisation is also associated with centralisation in relation to the need to

identify national standards and devolution in terms of devolved power.

This undercurrent of centralisation is also evident in theoretical and

conceptual approaches to decentralisation. This tension is based on different

models that emphasise democracy, uniformity and equity (Newman, 2001).

The tension between national standards, central performance monitoring,

central accountability and regulatory approaches (CHAI, National Institute for

Health and Clinical Excellence (NICE)) and encouraging local responsiveness,

opportunity and innovation is an inherent element of public service delivery in

the UK (Burns, 2000) and in the last 2 years the Government has been

introducing policies explicitly aimed at decentralising and even devolving

power, such as earned autonomy, devolution of budgets to PCTs and

proposals to establish foundation hospitals while establishing central

regulatory frameworks (CHAI, NICE) and national standards through the

national service frameworks, national performance targets and the

Modernisation Agency. Such policies need, however, to be set within the

context of wider and longer-term developments in decentralisation and

devolution in health care such as the promotion of primary care and

changes in local government and other public services from the 1970s

onwards (Burns et al., 1994; Paton, 1996; Pollitt et al., 1998; Powell, 1998;


NCCSDO 2006 15

Boyne et al., 2003; Peckham and Exworthy, 2003). These developments have

included administrative decentralisation, the internal market and, more

recently, developing new devolved organisational structures with new

governance arrangements (PCTs and foundation hospitals). Furthermore,

current proposals for devolution to English regions provides a further context

to this debate (Hunter et al., 2005).

1.2 Aims and objectives

The aim of this review is to examine the nature and application of

decentralisation as an organisational model for health care in England. The

study briefly reviews the relevant theoretical literature from a range of

disciplines relating to different public and private contexts of decentralisation

and centralisation. It examines empirical evidence about centralisation and

decentralisation in public and private organisations and explores the

relationship between decentralisation and different incentive structures, which

in turn affect organisational performance.

The research brief given by National Co-ordinating Centre for NHS Service

Delivery and Organisation R & D (SDO) requested a study to inform policy and

set the agenda for further empirical research in this area. The research brief

required the review to address the following questions.

1 What is meant by each of the terms centralisation, decentralisation and

devolution and are there any ways to measure the extent to which each

is occurring?

2 In hierarchies what degree of decentralisation and devolution (or

centralisation) in relationships between public service organisations is

most effective in terms of the quality of those relationships, both

vertically up and down the hierarchy and horizontally between

organisations in the same tier in the hierarchy?



most effective in terms of enhancing the performance of those

organisations?

4 What are the implications of the foregoing issues for the organisation of

health services in England?

The brief identified the need for the literature review to include the relevant

theoretical literature in a range of disciplines including organisational

economics, political science, organizational studies, sociolegal studies,

organisational sociology and organisational psychology. We were required to

examine the theoretical literature relating to privately owned and run firms,

but also that the extent to which it is relevant to public services should be

discussed. Empirical evidence about centralisation and decentralisation in

public and private organisations should also be summarised and discussed.

We were required to examine whether there are relevant lessons from sectors

other than health, and include evidence from countries outside the UK, where

relevant. Differences between different sectors (i.e. the publicly owned sector,

the for-profit sector and the voluntary sector) should be discussed.


NCCSDO 2006 16

Although the main theme of this review is centralisation, devolution and

decentralisation, the SDO brief required us to take account of the different

literatures in this area as it was likely that a more complex and dynamic

relationship existed than perhaps the concepts of centralisation,

decentralisation and devolution appear to indicate. These concern the

changing nature of the dynamics between parts of a system over time

resulting from the combination of multiple centres of direction and regulation

(including financial, political and technical) and multiple strategies emerging

among the regulated organisations (including collaboration, compliance and

competition).

In discussing these themes and undertaking an initial exploration of the

literature the research team clarified the research questions in the research

brief, identifying the purpose of the research project as being to examine the

evidence from the UK (and elsewhere) to do the following.

1 Define the terms centralisation, decentralisation and devolution and how

these can be measured.

2 Identify the relationship between the degree of decentralisation and

devolution (or centralisation) in relationships between public service

organisations and the effectiveness and quality of those relationships,

both vertically up and down the hierarchy and horizontally between

organisations in the same tier in the hierarchy.

3 Identify what degree of decentralisation and devolution (or centralisation)

in relationships between public service organisations is most effective in

terms of enhancing the performance of those organisations.

4 Identify key lessons for the organisation of health services in England.

1.3 The literature review

This study reviews the relevant theoretical literature and examines empirical

evidence about centralisation and decentralisation in public and private

organisations. In particular, it explores the relationship between

decentralisation and different incentive structures, which in turn affect

organisational performance. Three broad areas of performance were

examined relating to producer quality (staff satisfaction, inter-organisational

relationships, technical and allocative efficiency), user quality (outcomes for

patients, equity) and accountability (local and central performance targets,

national quality standards, national protocols and guidelines). In order to

draw lessons for the NHS in England we examined UK literature and English-

language literature from countries where there are similar centralist and

decentralist tensions. This is a multi-disciplinary review and a key goal has

been to develop a framework drawing on different disciplines and theories,

identifying the implications for different concepts and measures.

The method adopted for this literature review followed methods used in

previously successful studies (Robinson and Steiner, 1998; Exworthy et al.,

2001; Arksey and OMalley, 2005). The main objectives of the review were:

to map the available literature


NCCSDO 2006 17

to provide a critical overview of existing work in relation to appropriate

themes

to identify areas where more research may be of use

to consult with users to complement and enhance overall findings.

The review appraised empirical studies but it did not measure the

effectiveness of particular interventions. It does, however, identify the effect

of particular decentralised/devolved organisational, structural, procedural and

accountability arrangements, and their relationship to performance,

identifying lessons for the NHS in England. This approach reflected the

expected large number of studies that could have potentially been studied.

Unlike standard literature reviews, this study took into account recent and

current policy contexts in the UK and elsewhere. The focus was primarily on

health care systems and organisations but other spheres of the public sector

and the private sector were also considered. Moreover, a significant grey

literature was anticipated; this proved correct. Although each item in this

literature was not examined in detail, it informed the study in terms of policy

context and contemporary relevance. Thus the review modified the standard

approach in order to accommodate the nature of the anticipated evidence and

policy context. In summary, given the diversity and volume of literature

available and following consultation with the SDO and our expert panel,

attention was focused on evidence that contributed to the following.

Understanding of the UK policy context, including empirical studies as

well as literature from political science, organisational studies and social

policy.

Understanding of the organisational and performance impact of

decentralised/devolved structures.

Relevant methodological issues that may be considered in commissioning

future research.

1.4 Review methods

1.4.1 Search strategy

Our initial strategy was to identify literature that examined the concept of

decentralisation. This was mainly books and monographs. Each of the

research team members read books to develop a clearer understanding of the

conceptual and theoretical debates related to decentralisation. This initial

review informed search strategy and this covered three key parameters.

1 Key words: decentralization, centralization, devolution, organizational

autonomy, subsidiarity, federal, localism, centralism, regionalization and

centrallocal relations. Alternative spellings were also included (e.g.

decentralisation).

2 Time period: literature published since 1974 was sought on the

assumption that more recent evidence would have greater applicability to

the current context.


NCCSDO 2006 18

3 Coverage: for practical reasons, only English-language papers were

identified (although the potential value of some evidence published in

other languages was recognised).

1.4.2 Data search

The search strategy was applied to five sources of evidence (See Appendix 1

for a summary of database search results).

1 Electronic database searches including ASSIA, Business Source Premier,

Medline, BIDS, HMIC, IBSS, Sociofile, Kings Fund library and SIGLE on

grey literature in Europe.

2 Electronic searches of current research (including the Department of

Health National Research Register and ESRC) and manual searches

(including reference lists and forthcoming reports).

3 Manual and electronic search of grey literature (e.g. policy statements,

reports, unpublished research) and ephemeral literature (e.g. pamphlets

and newsletters).

4 It was expected that health service/policy organisations would hold

documents relating to decentralisation. We found further evidence via the

Kings Fund and policy think-tanks such the Institute for Public Policy

Research (IPPR) and DEMOS.

5 A cumulative search of references within retired articles identified further

sources of evidence.

1.4.3 Data categorization and appraisal

An initial batch of 20 articles was analysed by all team members and

summaries were compared. This ensured that consistency of terminology and

approach was secured at the outset. Variance was discussed, and a common

approach agreed. From an initial trawl of over 500 items of evidence, 205

were deemed relevant in terms of quality of the evidence and relevant to

contemporary English health care organisations.

For each of the 205 items of evidence, a summary was produced (see

Appendix 2) drawing on the analytical frameworks identified from theories of

decentralisation and methodological appraisal. This summary differed from

the research application to incorporate preliminary conceptual analysis.

Summary of evidence according to:

Author(s)

Year of publication

Quality: peer reviewed; disciplinary field

Methods: quantitative/qualitative; brief description

Context: national system; sector (public/private; service field, e.g.

health, education)

Year of study

Terms used: key words from search strategy (see Search strategy,

above)


NCCSDO 2006 19

Measurement: which variables of decentralisation were measured?

Functions: which service-related functions were studied?

Performance domain: which aspect of performance (from evaluative

criteria) was studied?

Impact on organizational performance: what conclusions about

organizational performance were drawn?

Other comments

1.5 Analysis

The summary of evidence provided the basis for in-depth analysis across each

of the performance domains, required by the SDO Research Brief. Two other

performance domains emerged from the literature and were included in the

evidence summary and subsequent analysis. These included responsiveness

and accountability. Analysis followed a template to ensure consistency within

the project team and across each performance domain. This template

comprised:

assumptions underlying the performance domain: the presumed

relationship between decentralisation and that performance domain

caveats related to these assumptions

evidence in support of the main assumptions

evidence against the main assumptions

balance of evidence

relevance to the NHS.

1.6 Involvement of experts

From the outset of the project, experts from research, management and

policy fields were involved with this review in three main ways.

1 Expert panel: a panel of 12 experts was convened to provide insights and

perspectives upon the projects methods, findings and conclusions as well

as contemporary policy context. The panel comprised academic

researchers, NHS representatives (from the Department of Health, a

strategic health authority, a PCT and an NHS trust provider), a researcher

from a think-tank and a national journalist. The panel met three times

(April, September and December 2004) in Oxford. Three experts joined

the panel as so-called virtual members in the sense that they did not

attend meetings but papers were sent to them and their comments were

digested by the project team.


NCCSDO 2006 20

Membership of the expert panel

Pauline Allen London School of Hygiene and Tropical Medicine/SDO

Paul Anand Open University/SDO governance project team

Anna Dixon Department of Health and London School of Economics

Nigel Edwards NHS Confederation

Nick Goodwin London School of Hygiene and Tropical Medicine/SDO

Andrea Humphrey Department of Health

Ed Macalister-Smith Nuffield Orthopaedic Hospital, Oxford

Brian Mackness Thames Valley Strategic Health Authority

Geoff Meads Warwick University

Deborah Roche IPPR

David Walker The Guardian

Andrea Young Oxford city PCT

Virtual members

Ewan Ferlie Royal HollowayUniversity of London

Richard Saltman European Observatory, Madrid

Perri 6 University of Birmingham

2 Open University/SDO governance project: from the beginning of the

project close contact was kept with the partner SDO project on

governance being undertaken by Professor Celia Davies and colleagues at

the Open University. One of the governance project team members was a

member of our expert panel and Dr Mark Exworthy attended the Open

University project meeting of academic peers in September 2004.

3 Research networks: contacts with leading policy-makers, researchers and

commentators in the field were conducted throughout the project. This

network provided additional sources for policy-relevant theoretical,

unpublished and ongoing literature. These networks included the

opportunity to discuss interim findings (especially of conceptual

frameworks) with academic groups at seminars and conferences.

1.7 The structure of the report

The remainder of this report is divided into six sections. In Section 2 we

examine the theoretical and conceptual literature on decentralisation. The

section also presents a framework for conceptualising decentralisation that we

use in this report in our assessment of the evidence. Sections 3 and 4

examine the history and current policy context of decentralisation in the

English NHS. Section 3 provides an overview of decentralist policies and

organisational changes in the NHS and how these have been previously


NCCSDO 2006 21

assessed. In Section 4 we explore current policies in the NHS and examine

their relationship to decentralisation.

Section 5 uses the key performance criteria to discuss the literature on

decentralisation and organisational performance. Key assumptions about each

criterion are presented and then the extent to which these are supported by

theory and evidence is examined. In Section 6 this review is then applied to

the NHS, identifying the strength of evidence to support each of the individual

performance criteria.

In the final section we identify the implications for the English NHS that arise

from this assessment in terms of policy and practice. We also identify where

there are gaps in the evidence and highlight areas for further research.


NCCSDO 2006 22

Section 2 Understanding decentralisation

2.1 Introduction

There is an extensive literature on decentralisation, centralisation and

devolution that covers a wide range of disciplines including politics, public

administration, health services research, economics, management, sociology

and organisational studies. The diversity of the literature and the use of a

wide range of definitions creates problems for any analysis of decentralisation.

In this section we examine some of the main definitions of decentralisation

and briefly review the main frameworks that have been used in studies of

decentralisation in the UK and abroad. Drawing on these frameworks we then

present a new framework that is more appropriate for an analysis of

decentralisation in the UK health care system.

Central to how decentralisation is understood in this report is that fact that it

is inappropriate to solely view decentralisation in terms of an organisational or

geographical concept. Health and health care have an individual as well as an

organisational context. No examination of the delivery of health care can be

undertaken without reference to the roles of health care professionals and

patients and the fact that much recent policy has focused on professional

autonomy and regulation and patient involvement, self determination and

choice. Thus, any discussion of decentralisation in the NHS must capture

these elements as well as the more traditional spatial and organisational

context. Therefore, in this section we present a new decentralisation

framework that addresses this aspect. In addition, this review links

decentralisation to performance and the new framework takes this aspect into

account.

2.2 Overview of academic disciplinary approaches to decentralisation

There are two main problems associated with the breadth of the literature on

decentralisation. First, many associated phenomena are examined using

cognate terms rather than the term decentralisation. Second, the literature on

decentralisation is found in a large range of disciplines and theories, often

with few links between them.

The main cognate terms appear to be autonomy (Brooke, 1984; Gurr and

King, 1987; Boyne, 1993; Pratchett, 2004), discretion (Page and Goldsmith,

1987; Page, 1991; Bossert, 1998) and localism (Page, 1991; Stoker, 2004),

and tend to be found in the disciplines of political science and management.

Page and Goldsmith (1987: 3) state that it is conventional for cross-national

descriptions to use terms such as centralization, decentralization, central

control and local autonomy, but these terms do not on their own provide

adequate concepts on which to base a comparative analysis. Terms do not

clarify what particular aspect of the process of government is decentralized.

Consequently, it is easy for studies to talk past each other. Some studies,


NCCSDO 2006 23

such as Page (1991), on localism tend to use other terms, like autonomy and

discretion. However, it is unclear whether decentralisation equals autonomy

(Brooke, 1984: 9) or whether the terms are simply related. Moreover,

defining one problematic term by using another does not clarify analysis very

far.

According to Brooke (1984: 4), accountants, anthropologists, economists,

historians, lawyers, philosophers, psychologists, sociologists and theologians

as well as administrative, management and political scientists have been

called as expert witnesses. However, most reviews tend to focus on single

disciplines or theoretical areas. One of the few accounts to stress the multi-

disciplinary nature of the literature is that by Bossert (1998), who reviews the

four major analytical frameworks that have been used by authors to address

problems of decentralisation in the health sector: public administration; local

fiscal choice; social capital approach and principal/agent approach. Although

this is a much cited typology, it appears to be not fully comprehensive or

coherent. His public administration category is linked to the four-fold typology

of Rondinelli (1981) of deconcentration, delegation, devolution and

privatisation (see Frameworks of decentralisation, Section 2.5). However,

public administration approaches are much wider than that of one writer,

whose main contribution is in the field of development studies. Local fiscal

choice is largely the contribution of economists writing about fiscal federalism,

and is covered briefly below. Social capital is linked to the work of Putnam

(1993), which suggests that localities with long and deep histories of strongly

established civic organization will have better performing decentralized

governments than localities which lack these networks of associations. This

builds on the work of de Tocqueville and is linked to work on local democracy

and democratic theory (below). Finally, Bosserts favoured approach is

principal/agent theory, which he develops into his concept of a decision space

(Section 2.6). This draws largely on the work of economists who examine the

relations between the principal, who has specified objectives (e.g. central

government), and the agent, who achieves these objectives (e.g. local

authorities or hospitals). Its essence focuses on the different ways (e.g. using

hierarchical, market or network strategies), under conditions of information

asymmetry, that objectives can be achieved. As Bosserts framework is

partial, we set out a very brief review of the main disciplinary approaches to

decentralisation.

Political science saw some of the earliest debates on decentralisation. In the

nineteenth century, Chadwick and Toulmin Smith represented the polar

extremes of the centralisation/decentralisation debate in local government. A

long line of political philosophers, including Mill, Hobbes, De Toqueville, Burke,

Cole and the Webbs have contributed to the debate. Defenders of localism

such as W.A. Robson, D.N. Chester, George Jones and John Stewart have

fought a rearguard action against the tide of centralism. This debate has been

covered in fields such as local democracy and democratic theory (Hill, 1974;

Burns et al., 1994) central control and the central domination thesis

(Carmichael and Midwinter, 2003), centrallocal and intergovernmental

relations (Griffith, 1966; Rhodes, 1981, 1988; Bulpitt, 1983). Very broadly,

many political scientists believe that there has been too much centralisation in


NCCSDO 2006 24

the UK, and that a return to localism would be beneficial. This has prompted

an emphasis on the so-called new localism (Stoker, 2004; but see Walker,

2002). Other contributions have been in the field of federalism, which

examines the division of functions between national and local states (Anton,

1997; Palley, 1997), the politics of government grants (King, 1984; Newton

and Karran, 1985; McConnell, 1999; Glennerster et al., 2000) and political

devolution (Ross and Tomaney, 2001; Bradbury, 2003; Jervis and Plowden,

2003). Finally, the work of Smith (1980, 1985) is a notable contribution to the

study of decentralisation, as his 1980 article is one of the few that sets out

possible measures of decentralisation, and his 1985 book was a relatively

early and influential full-length treatment of the subject.

The contribution of economics falls within two broad areas. Public choice

theory (Niskanen, 1971) argues that efficiency is associated with competition,

information on organizational performance and small organization size (Boyne

et al., 2003). Fiscal federalism (Buchanan, 1950; Oates, 1972; Bennett,

1980; Levaggi and Smith, 2004) is based on determining the optimum size

for units carrying out the basic functions of public finance (Musgrave, 1959).

This area is one of the few that has produced a clear if heavily criticised

measurement of decentralisation: social expenditure at the local level as a

percentage of national social expenditure.

Historians have focused on local government, including the Chadwick/Toulmin

Smith debate (above) and a stream of government reports on differentiating

local from central functions in Victorian and Edwardian Britain (Smellie, 1968;

Keith-Lucas and Richards, 1978; Foster et al., 1980; Ashford, 1982, 1986)

running to the report of the Layfield Committee (1976) and the current

Balance of Funding Review (Stoker, 2004). There have also been

contributions on centrallocal relations (Bellamy, 1988), grants (Foster et al.,

1980; Baugh, 1992) and urban history (Daunton, 2000). Unlike political

science, few social administration texts focused on centrallocal relations (but

see Simey, 1937). Contemporary historians (Szreter, 2002; White, 2004)

have reassessed historical debates and attempted to determine whether

history has lessons for current reforms. Journalists have entered the fray,

with the battle of the broadsheets favouring (Jenkins, 1996; Marr, 1996;

Freedland, 1998) or opposing (Walker, 2002) localism, while there has also

been the tussle of the think-tanks (Mulgan and 6, 1996; Bankauskaite et al.,

2004).

Development studies has seen a great deal of work on decentralisation

(Cheema and Rondinelli, 1983; Conyers, 1984; Collins and Green, 1993,

1994; Mills, 1994; Manor, 1999; Bossert and Beauvais, 2002). The dominant

conceptual framework was developed by Rondinelli (1981), with further

frameworks by Bossert (1998) and Gershberg (1998). However, the very

different context of developing countries means that the transferability of

findings may be problematic (see Understanding and interpreting the

evidence, Section 6).

Contributions from management include Bourn and Ezzamel (1987), Brooke

(1984), Bromwich and Lapsley (1997), Common et al. (1992), Hales (1999)

and Pollitt et al. (1998). There is a large number of sub-areas within


NCCSDO 2006 25

management research, such as organization theory, quantitative approaches,

political economy approaches and accounting approaches (Brooke, 1984:

14950). One of the few attempts to operationalise decentralisation involves

the locus of decision-making: who is the last person whose assent must be

obtained before legitimate action is taken? (Brooke, 1984).

Finally, there are fewer but equally diverse contributions from geography

(Paddison, 1983; Pinch, 1991; Atkinson, 1995). Although written by an author

from a university geography department and published in a geography

journal, Atkinsons (1995) review on tracking the decentralisation debate

focuses largely on development studies, cites few geographers and does not

appear to offer any distinctive geographical point of view. Pinch (1991)

compares service distribution in two Australian cities, but his claim that they

represent different levels of decentralisation is not supported by any evidence.

Paddison (1983), within a general text on political geography, provides a

useful review of some of the decentralisation literature, including early

definitions and measures.

All this means that the vast literature on decentralisation and associated

concepts, with differences in concepts, contexts, measures and findings,

makes any attempt at summary and synthesis extremely difficult. In

particular, decentralisation has been used as a comparative concept rather

than as an absolute measurement. Decentralisation has been analysed

primarily within historical and political contexts. Studies have sought to

examine trends over time or within or between political structures and

systems. The literature on decentralisation has tended to reflect these two

contexts and frameworks developed to examine decentralisation reflect these

contexts. These points are discussed later in this section. As this review

demonstrates, application of decentralisation to the NHS also reflects these

contexts. The political context of the NHS is, as identified in Section 1, one

where political power is held centrally by Parliament with no sharing of

political authority by the NHS. This situation has remained unchanged since

the inception of the NHS in 1948, although outside of England there has been

devolution to political assemblies in Scotland, Wales and Northern Ireland.

However, historically there has been a long-term interest in decentralisation

and this context is discussed in Sections 3 and 4.

2.3 What is the purpose of decentralisation?

Before examining what is meant by decentralisation it is worth exploring what

decentralisation or, for that matter, centralisation is meant to achieve.

This is a question about policy goals or ends. The research brief outlines two

fundamental questions that relate to why services may be centralised or

decentralised.



most effective in terms of the quality of those relationships, both

vertically up and down the hierarchy and horizontally between

organisations in the same tier in the hierarchy?


NCCSDO 2006 26



most effective in terms of enhancing the performance of those

organisations?

At the heart of these questions are assumptions about the purpose of

decentralisation. Specifically are there degrees of decentralisation that can

improve relationships between organisations and improve organisational

performance? As discussed above the literature on decentralisation is very

broad but there is a predominant view that decentralisation is in itself a good

thing, both in terms of the process and as an outcome, as demonstrated in

Tables 1 and 2. Table 1 presents the measures of organisational performance

defined by the SDO whereas Table 2 identifies two further performance

criteria identified from the literature. The tables then outline the key

assumptions that have been made about the outcomes of decentralisation

that have been identified in the theoretical, conceptual and empirical

literature. However, as Pollitt et al. (1998) have observed:

In short, [decentralisation is] a miracle cure for a host of bureaucratic and

political ills. Academics with a taste for post-modernism would no doubt refer to

it as an attempt at a meta-narrative a conceptual and linguistic project

designed simultaneously to supersede (and therefore solve) a range of

perceived ills within the previous discourse of public administration.

(Pollitt et al., 1998: 1)

The view that decentralisation is a good thing is not, though, universally

shared and a number of commentators have identified that increasing

decentralisation may in fact lead to adverse consequences. In particular,

Walker (2002) has argued that increased decentralisation leads to

inefficiencies of scale and increasing inequities, consequences that are

identified in the broader theoretical literature (De Vries, 2000; Levaggi and

Smith, 2004). Walkers arguments go further though, as he argues that

centralisation can produce many of the results claimed for decentralisation,

such as innovation. The point being made here is that it is not the level (more

or less centralised/decentralised) of organisation that is important. This raises

a key question therefore about whether decentralisation can produce the

benefits identified in Tables 1 and 2 and what arrangement of decentralisation

that is, what is decentralised to where provide the maximum benefits. In

order to do this it is necessary to clearly define decentralisation and the

parameters that relate to it.


NCCSDO 2006 27

Table 1 Key assumptions about the impact of decentralisation on SDO-defined organisational performance criteria

SDO criterion Assumptions about the benefits or otherwise of decentralisation

Theoretical background

Comments

Outcomes (for patients/health outcomes)

Assuming decentralisation is linked to (professional) autonomy: advocates of professional autonomy claim that their discretion in responding to individual patient needs (diagnosis, treatment, prescription/referral) makes their (clinical) decision-making more effective in terms of patient outcomes. (Note: this conflicts with evidence-based medicine, assuming that the evidence is clear-cut in directing clinical decision-making.) (Friedson, 1994)

A decentralised and participative form of organisation is most conducive to effectiveness from an organisational perspective (Likert, 1967; Agyris, 1972).

Professional autonomy

Fiscal federalism

Assumes that autonomous professionals make the best decisions for patients

Assumes that improved effectiveness produces better outcomes

Relates to effectiveness of services: see also allocative and technical efficiency

Process measures

Reduces the decision load by sharing it with more people (De Vries, 2000)

Allows more organisational flexibility and enables quicker responses (De Vries, 2000)

Allows easier co-ordination between individuals; but overall co-ordination hampered (Carter, 1999)

Intergovernmental relations

Federalism

Fiscal federalism

Principal-agent theory

Extends hierarchical lines of control more stretched, more intrusive?

Humanity Being closer to the public makes agencies more conscious of their responsibility to and relationship with local communities (Hambleton et al., 1996).

Organisations and the people within them are more visible to local service users and communities, leading to a desire to be seen to do the right thing, be more open and be accountable locally (Burns et al., 1994; Hambleton et al., 1996).

New public management

Democratic theory

Assumes democratic organisations are more effective at meeting local needs and therefore outcomes are more effective

Relates to staff morale/satisfaction and responsiveness

Staff morale/ satisfaction

Develops staff: job satisfaction, loyalty (Burns et al., 1994)

Freedom to manage; managerial autonomy (DHSS, 1983)

Generates higher morale (Osborne and Gaebler, 1992; see De Vries, 2000)

Human resource-management theories


NCCSDO 2006 28

Recruitment of skilled officials more difficult at local level (De Vries, 2000)

Increases satisfaction, security and self-control (Pennings, 1976)

Decentralised and participative form of organisation is most conducive to effectiveness from an employee perspective (Likert, 1967; Agyris, 1972)

Equity: horizontal but not vertical

Increases equity by allowing services to meet better the needs of particular groups (argument against), possibly through targeted funding (Bossert, 1998).

Intergovernmental relations (Rhodes, 1997)

Note the common assumption that decentralisation widens inequality as the potential for local variations is widened

Efficiency (allocative)

Improvement in the quality of public services: more sensitive service delivery - achieves distribution aims: target resources to areas and groups (Burns et al., 1994)

Improves (allocative) efficiency as patient responsiveness and accountability improves (e.g. improved governance and public service delivery by increasing the allocative efficiency through better matching of public services to local preferences) (Saltman et al., 2003)

Is more likely to reflect local preferences (De Vries, 2000)

Public choice theory


Relates to effectiveness and responsiveness

Efficiency (technical/ productive)

Improves as managers devote greater attention and are more responsive; fewer layers of bureaucracy*; better knowledge of costs (e.g. improves governance and public service delivery by increasing technical efficiency through fewer levels of bureaucracy, and better knowledge of local cost) (Saltman et al., 2003)

Experimentation and innovation (Oates, 1972)

Smaller organisations perform better (Bojke et al., 2001)

Increases technical efficiency through learning from diversity (De Vries, 2000)

Centralisation generates more waste: local people, local provision and local services are cheaper (De Vries, 2000)

Controls costs (Burns et al., 1994)

Public choice theory

Fiscal federalism

Relates to effectiveness

*Assumes some restructuring (e.g. delayering), especially at the centre and regional tiers


NCCSDO 2006 29

Allows more organisational flexibility and enables quicker responses (De Vries, 2000)

Adherence to performance targets and evidence-based protocols

Decentralisation strengthens the hierarchical chain of command between the centre and locality (the transmission belt) and thereby ensure that central targets are adhered through contractual relations (Hughes and Griffiths, 1999).

Intergovernmental relations


Literature on getting evidence into practice shows that independence of practitioners is a constraint (e.g. Harrison et al., 1992).

Table 2 Key assumptions about the impact of decentralisation on additional organisational performance criteria

Additional criterion

Assumptions about the benefits or otherwise of decentralisation

Theory Comments

Responsiveness

Is seen as a way of increasing responsiveness (Meads and Wild, 2003)

Enhances civic participation; neutralises entrenched local elites and increases political stability (De Vries, 2000)

Strengthening of local democracy: visibility, community development and encourages political awareness (Burns et al., 1994)

Is more likely to reflect local preferences (De Vries, 2000)

Local democracy and democratic theory

Also refers to responsibility and accountability to the patient/public

Accountability Enhances civic participation; neutralises entrenched local elites and increases political stability (De Vries, 2000)

Increases democracy and accountability to the local population (Burns et al., 1994; Bossert, 1998; Meads and Wild, 2003)

Makes agencies more conscious of their responsibility to and relationship with local communities (Hambleton et al., 1996)

Democratic theory

Participative democracy

New public management


NCCSDO 2006 30

2.4 What is decentralisation?

In a recent examination of decentralisation in health services Saltman et al.

(2003) found that:

According to widely accepted definitions, decentralization is the transfer of

authority and power in planning, management and decision making from

higher to lower levels of organizational control.

(Saltman et al., 2003: 2)

This immediately places decentralisation within an organisational and

geographical context. This is a fairly consistent approach to defining

decentralisation. For example, Smith (1985) argues that Decentralization

entails the subdivision of a states territory into smaller areas and the creation

of political and administrative institutions in those areas (p.1). Burns et al.

(1994), in their discussion of local government, distinguish two types of

decentralisation: On the one hand, it is used to refer to the physical dispersal

of operations to local offices. In a second sense, it is used to refer to the

delegation or devolution of a greater degree of decision making authority to

lower levels of administration or government. In common usage, these

meanings are sometimes combined (p.6). Similarly, Levaggi and Smith

(2004) suggest that in broad terms it entails the transfer of powers from a

central authority (typically the national government) to more local institutions

(p.3). Pollitt et al. (1998) identify a further dimension of decentralisation with

the observation that Common to most of these [academic] treatments is an

underlying sense that decentralisation involves the spreading out of formal

authority from a smaller to a larger number of actors (p.6). This definition

draws together both vertical and horizontal concepts of decentralisation.

Authority can be decentralised by authority being transferred to lower levels

of an organisation (vertical decentralisation delegating or devolving) and by

the spreading out of authority from a central point (horizontal decentralisation

deconcentrating). These terms are those commonly used in definitions and

descriptions of decentralisation and are discussed below.

Boyne (1992) has further clarified the vertical and horizontal dimensions of

decentralisation, identifying the processes of concentration and

fragmentation. Activities may be spread across (fragmented) the vertical and

horizontal axes or concentrated at particular levels or in particular

organisations. In health, for example, while there are a number of levels from

the Department of Health to practitioners there is a concentration of functions

in PCTs. In the local horizontal context we might also define PCTs as

concentrating a number of local health functions.

From this brief discussion it is clear that there are a number of concepts that

are associated with decentralisation, including power, authority, delegation

and devolution. This creates problems when defining decentralisation,

although Deeming (2004) has argued that decentralization is a relatively

straightforward concept to define, in that:

A public service is more or less decentralized to the extent that significant

decision-making discretion is available at lower hierarchical levels, with the


NCCSDO 2006 31

managers and staff who are closer to the people receiving services. In such

circumstances substantial responsibilities for the control of budgets are at a

level closer to the service user, allowing services to be responsive to individual

need (Harrison and Pollitt, 1994). For example, doctors and nurses in primary

care controlling most of the NHS budget.

(Deeming, 2004: 60).

However, this definition incorporates a further concept that of discretion.

This points to the need to identify not only what is being decentralized to

whom but what power or autonomy exists in terms of the freedom to make

decisions. This will always be a balance in any large organization between

individual discretion and the application of rules of behaviour (Hill, 1997). It

also clear that any discussion of decentralisation in both a vertical and

horizontal sense lead to questions about what the converse movement is; that

is, centralisation. If decentralisation refers to a vertical shifting of power

downwards or a deconcentration of power then centralisation must be the

opposite of this. Decentralisation and centralisation are alternative modes of

control (Harrison and Pollitt, 1994). Therefore, a public service is more or less

centralized to the extent that significant decisions are taken upstream at the

centre of government within a tighter system of control and accountability. It

would mean politicians in government (through the channels of the

Department of Health and NHS Executive) controlling important decisions

about how the NHS budget is spent on local health care services (Deeming,

2004: 60). Before examining these concepts in more detail it is important to

examine the different ways that writers have classified decentralisation.

2.5 Frameworks of decentralisation

The concepts that emerge in this discussion of how decentralisation is defined

are found in frameworks developed to describe decentralisation. However,

much of the literature focuses on either local government or at least the

organisation of public administration within a specific country. This has

important implications for the conceptual frameworks that are drawn upon

and the extent to which frameworks are relevant to health care services and

the UK. Discussion of decentralisation has tended to be within a political

context with assumptions about democratic frameworks and fundraising

powers. Thus the transfer of political power from one level to another forms

part of the context and conceptual framework for decentralisation. Devolution

is the moving of democratic, governmental authority from higher to lower

levels of the state, such as the shift of responsibility from the UK Parliament

to the Scottish Parliament and Welsh Assembly, which both have

responsibility for health care in their respective countries. Clearly, within

England there is no similar devolution and while it may be useful to examine

the effect of such devolution on health care services it is not relevant in the

current context of the English NHS. Whereas no political transfer of power

occurs in England there is administrative decentralisation in the sense that

local NHS organisations have responsibilities and exercise authority over

many aspects of health care services. These points are reflected in the

frameworks of decentralisation discussed in this section of the report.

However, of particular importance is the fact that in filtering the evidence on


NCCSDO 2006 32

decentralisation later in this report this distinction becomes important in

terms of selecting relevant evidence (see Sections 5 and 6). However, it is

worth briefly examining some of the main frameworks that purport to define

decentralisation.

Many commentators agree that there are problems of defining

decentralization. As Gershberg (1998: 405) put it, the concept of

decentralisation is a slippery one: it is a term like empowerment or

sustainability empty enough on its own that one can fill it with almost

anything. Hales (1999: 832) claims that a review of the extant literature does

little to dispel Mintzberg's (1979: 181) observation that decentralisation

'remains probably the most confused topic in organization theory'. Page and

Goldsmith (1987: 3) claim that it is conventional for cross-national

descriptions to use terms such as centralisation, decentralisation, central

control and local autonomy, but these terms do not on their own provide

adequate concepts on which to base a comparative analysis. Terms do not

clarify what particular aspect of the process of government is decentralised.

Consequently, it is easy for studies to talk past each other. In order to make

valid comparisons, it is necessary to have a framework for comparison that

removes the ambiguity in existing terminology.

The most commonly used framework is that developed by Rondinelli (1983),

who identified four categories:

1 de-concentration: a shift in authority to regional or district offices within

the structure of government ministry

2 delegation: semi-autonomous agencies are granted new powers

3 devolution: a shift in authority to state, provincial or municipal

governments

4 privatisation: ownership is granted to private entities.

This framework was developed from research in developing countries with a

focus on the legal framework of decentralised organisations. Whereas this is

the most widely quoted framework, there are some key problems. The first is

that power and authority appear to be conflated. It is not entirely clear how

delegation and devolution differ, for example, although in use devolution is

generally referred to as a political decentralisation whereas delegation is seen

as an administrative decentralisation. However, the categories are often used

interchangeably in the literature. Despite Rondinellis claim for a radical

category the inclusion of privatisation is also a problem, as not all

privatisations are decentralisation. In fact privatisation may occur centrally or

in decentralised units and it may or may not involve a transfer of power or

authority, depending on the nature of the market or contractual relationship

that is established (Bossert, 1998). Rondinellis framework has been most

widely used as the basis for later analyses of decentralisation although a

number of differing frameworks have been developed.

For example, Burns et al. (1994), in the Politics of Decentralisation, identify

five dimensions of decentralisation. These are:

1 localisation: physical re-location to local offices away from a central point

2 flexibility: multi-disciplinary teams and multi-skilling


NCCSDO 2006 33

3 devolution: decision-making powers delegated

4 organisational: re-orientation of organisational values and culture

5 democratisation: widening opportunities for public involvement.

They argued that:

It is helpful, in discussions about local government, to distinguish two types of

decentralisation. On the one hand, it is used to refer to the physical dispersal of

operations to local offices. In a second sense, it is used to refer to the delegation

or devolution of a greater degree of decision making authority to lower levels of

administration or government. In common usage, these meanings are

sometimes combined.

(Burns, et al., 1994: 6)

This approach is very structured in terms of what the dimensions represent

and are associated with a particular approach in local government to

developing processes for achieving a different relationship between local

people and their local government. In contrast, in a paper for the Local

Government Management Board Hambleton et al. (1996) identified four broad

categories:

1 geography-based: physical dispersal

2 power-based: decision-making authority

3 managerial: improving the quality of services

4 political: enhancing local democracy.

Here, however, there is a potential overlap between categories, for example

between the power and political categories. Like Burns et al. (1994) the

dimensions are also related specifically to local government in that it assumes

that there are elected representatives. There is also some synergy with Burns

et al. as both frameworks relate to geography, organisational change and a

shift in power from a ventral or higher authority to a lower and or dispersed

authority. These themes recur again in work by Pollitt et al. (1998) on

decentralising public services management. They identify three categories but

with binary options:

1 politics: authority decentralised to elected representatives;

administration: authority decentralised to managers or appointed bodies

2 competitive: competitive tendering; non-competitive: agency given

greater authority to manage its own budget

3 internal: decentralisation within an organisation; devolution:

decentralisation to a separate, legally established organisation.

These frameworks still tend to focus on organisational and geographical

decentralisation. They are concerned with describing the institutional

framework of government or administrative systems.

In contrast, in his paper Decentralisation: managerial ambiguity by design

Vancil (1979) was more concerned with what was being decentralised. His

view was that real decentralisation is marked by the degree of autonomy in

organisations the extent to which organisations have a high degree of

authority over particular functions and activities with limited responsibility (or

accountability) to others. In respect to health we can also see how this relates


NCCSDO 2006 34

to individuals as well (clinicians and potentially patients). Clearly most writers

make some reference to power but it is not explicit within the frameworks.

In many of the articles the application of decentralisation is mainly focused at

a macro level, using the three elements of fiscal, administrative and political

(authority) decentralisation. These are broad categories and clearly contain a

wide range of sub-categorisation that is rarely referred to in the literature.

How useful then is decentralisation as a concept? There is:

the danger of being deceived by the disarming familiarity of a word which

our experience suggested usually masked a multiplicity of prescriptions

addressed to different symptoms. There is a sense in which decentralisation is

almost an empty term, a kind of camouflage behind which a diverse range of

(often incompatible) political and organisational strategies find cover.

(Hoggett, in Hambleton and Hoggett, 1987: 215)

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